Insurance coverage up, costs down

Record crop insurance coverage and moderately lower premiums expected in 2021

About 90 per cent of Manitoba’s cultivated acres are covered under AgriInsurance.

Manitoba AgriInsurance coverage is expected to hit a record $3.128 billion this year, while premiums will be moderately lower, says a joint federal-provincial news release.

It’s due to a combination of higher crop values and reduced crop insurance payments over time.

“There are two pieces of the puzzle,” David Van Deynze, chief product officer with the Manitoba Agricultural Services Corporation (MASC), which administers AgriInsurance in Manitoba, said in an interview Feb. 11. “When we are talking about yields for farmers we dropped off 2009 and added 2019. When we’re talking about premium costs for farmers we dropped off 1994 and added 2019. We calculate premiums over a 25-year period and we calculate coverage over a 10-year period.

“We look at our losses over the last 25 years of each crop and we set our premium rates that way. When we drop off the 25th year — if it was a bad year — then the remaining 25 look a little bit better and your premium rates are a little bit cheaper for farmers.”

Why it matters: About 90 per cent of Manitoba’s cultivated acres are covered under AgriInsurance making the program one of the most important risk management options for this province’s farmers, who naturally seek better coverage at a lower cost.

Last month Alberta’s AgriInsurance administrator, Agriculture Financial Services Corp., (AFSC), announced a 20 per cent cut in crop insurance premiums to be made up by the agency’s reserve fund. The fund builds when premiums going in exceed payouts.

AFSC’s crop fund reserve “is now at a point where it can help support discounted premiums, without posing significant risk to the overall program,” AFSC said in a release.

That said, there’s still enough in the fund to “mitigate a major event, such as a province-wide disaster in 2021 or beyond,” the agency added.

Premiums in Manitoba, on the whole, will be “moderately lower than last year,” the federal-provincial release says.

“It is a bit of a balancing act,” Van Deynze said. “We try to be responsible with it, but at the same time try to return those premiums to producers and governments when there’s too much in the bank.”

The goal is to make the program break even over time.

The method for determining crop insurance premiums in Alberta, Saskatchewan and Manitoba are similar, Van Deynze said.

“Crop experience is going to drive the differences more than program design I would say,” he added. “If Alberta had some big-loss years Alberta’s coverage and premiums will be different than ours if we didn’t have big-loss years. In terms of fundamental design they are pretty similar.”

He added there are some differences but at the end of the day there’s not a lot to choose between the three provinces, especially when insuring common crops such as wheat and canola.

MASC currently has a $778-million surplus.

“While that is certainly a lot of money, when we compare it to our expected (potential) liability of $3.128 billion, you can see that it is possible for that surplus to disappear quite quickly if we have a bad crop year,” Van Deynze wrote in an email Feb. 12.

“We automatically discount our premiums when we have a large surplus. For 2021 we have a 14.7 per cent discount calculated into our premiums.”

Manitoba’s expected $3.128 billion in crop insurance coverage in 2021 is what would be paid to farmers if every field seeded wasn’t harvested, Van Deynze said.

It’s also an educated guess based on the assumption farmers will plant much the same as last year, with similar coverage levels. But if crop prices jump for a certain crop that could result in increased plantings and even higher coverage, he said.

Manitoba farmers new to crop insurance, or existing clients wishing to make changes to their AgriStability contracts, have until March 31 to do so.

It will be business as usual at existing MASC offices until then. As of April 1, a number of offices will close or be relocated as part of the Manitoba government’s plan to streamline MASC and Manitoba Agriculture and Resource Development services.

Other changes to AgriInsurance in 2021 include:

Introduction of an Individual Productivity Index (IPI) for silage corn.

Until this year coverage was based on soil classification only. For example a farmer with a C soil would get the same coverage no matter where they were located or what their historical yields were.

“We finally got to a place where we felt confident we could bring in the farmer’s own experience,” Van Deynze said. “So farmers growing bumper silage corn crops that will start to be reflected in their coverage as we go forward.”

The IPI creates an index comparing each individual farmer’s historic yield for a particular crop against the area average and is used to calculate a farmer’s crop insurance coverage.

Extended seeding dates for winter wheat and fall rye.

As announced last fall the full coverage seeding dates for both crops are now Aug. 15 to 25. When seeding from Sept. 26 to 30 coverage drops 20 per cent.

A higher transportation allowance within the Forage Insurance dollar value and Hay Disaster Benefit for the Forage Insurance program.

The transportation allowance will be $16 per tonne instead of $8 for Select and Basic Hay, and $24 per tonne for the Hay Disaster Benefit.

MASC’s hail insurance, which is a commercial program and not subsidized by governments, will also see increased coverage levels for 2021. Maximum hail dollar coverage will be $300 an acre instead of $250 based on expected gross revenue for most crops.

The 2021 premiums are the same as, or lower than, 2020 rates for most risk areas.

Expected hail coverage will increase to $1.1 billion from $985 million.

Under the Canadian Agricultural Partnership, which does not cover MASC’s hail program, AgriInsurance premiums for most programs are shared 40 per cent by participating farmers, 36 per cent by the federal government and 24 per cent by the Manitoba government.

Administrative expenses are paid 60 per cent by Canada and 40 per cent by Manitoba.

Governments’ total share of AgriInsurance premiums for 2021-22 is expected to be $130 million.

– With files from the Alberta Farmer Express.

About the author

Reporter

Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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